Corporation Tax Act 2010 section 576

Notice under section 572: breach of conditions as to balance of business

Section 576 sets out the circumstances in which HMRC may terminate a company's UK REIT status by issuing a notice where the balance of business conditions have been repeatedly breached.

• HMRC may issue a termination notice if the balance of business conditions (condition A or B) are breached in three consecutive accounting periods (excluding the first accounting period of REIT status).
• HMRC may also issue a termination notice if the REIT has relied on the statutory tolerance for balance of business breaches more than twice within a rolling ten-year period.
• Where a single breach spans more than one but no more than two accounting periods, it counts as only one instance of reliance on the tolerance provisions for the purpose of the "more than twice" limit.
• The ten-year period starts from the last day of the accounting period in which the tolerance was first relied upon (for condition A breaches, this is the last day of the accounting period in which profits are assessed).